The 22-year-old was linked with a number of clubs throughout Europe, including West Ham, Fulham, Norwich, Tottenham and Reading.
French side Sochaux and Italian side Genoa have also been linked with the Azerbaijan-born winger.
Hamad will officially join Hoffenheim in January.
“Hamad is a young, ambitious and still developing player who has shown his qualities in Sweden,” said Hoffenheim sports director Alexander Rosen.
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Chelsea have struggled to build momentum in the opening stages of the campaign and are currently looking over their shoulders at the relegation zone.
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